When it comes to digital transformation, consumers are the first movers—from our rapid adoption of mobile devices and wearables to the steady rise of in-home voice assistants and streaming TV. Brands, in turn, are now making major investments to cater to the new digital customer experience. And today, that means harnessing the tremendous power of data and analytics to build transparent relationships with consumers. But where are the agencies in their own digital transformation?

Unfortunately, too many are lagging behind. Over the summer, brands began yet another giant round of agency reviews—the second in less than two years. And Procter & Gamble and Unilever—two of the world’s largest brand advertisers—followed up their continued calls for industry transparency by significantly reducing their ad budgets.

Meanwhile, in the past year, 38% of advertisers have revisited their agency contracts to exert greater control over their data and technology. Almost a third had already done so, and another 24% say they plan to. It’s clear that despite their calls for greater control and transparency, brands are still not getting what they want.

So how can agencies reinvent themselves and rise to these ongoing challenges?

Agency Challenges And Challengers

Ever since the Association of National Advertisers reported on the pervasiveness of non-transparent practices in the ad industry, the relationship between brands and agencies has come under scrutiny. At the same time, agencies are also coming up against new competitors, as consulting firms like Deloitte, Accenture, and KPMG build up their marketing operations. With brands slashing their ad budgets and modifying their contracts, agencies need to fundamentally adjust how they approach their clients. But are they adjusting fast enough?

Some are making strides. WPP’s GroupM recently merged legacy agency of records (AORs) with newcomer Essence. And Publicis, which acquired Sapient, is re-energizing Razorfish with a deeper IT focus, not to mention spinning up a new centralized brand, called Publicis Spine, a la Omnicom’s Annaclect, to build up data and analytics expertise. But these efforts by the global agency networks face the challenge of massive change management across thousands of people and dozens of local offices around the world—not to mention large clients whose scale requirements tend to thwart innovation. A tall order to be sure.

This begs the question: Could these challenges actually present an opportunity for smaller, more nimble independent agencies to come out on top?